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ORIE_451_Homework__2

# ORIE_451_Homework__2 - salvage value(X of project B that...

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ORIE 451/551 Homework #2 Due February 8, 2008 1. Consider the four mutually exclusive projects given below. Project Investment at Time Zero IRR A \$2,000 45% B \$2,500 40% C \$3,000 35% D \$3,500 30% The service life for all the four projects is the same and investment is required only at time zero. Also, IRR(B-A) = 17%, IRR(A-D) = 15%, IRR(D-C) = 10%, IRR(B-C) = 20%. Which project would you prefer at a MARR of 13%? 2. Consider two mutually exclusive projects A and B. Assume that each project can be repeated indefinitely with the same cash flows. Find the
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Unformatted text preview: salvage value(X) of project B that would make both the projects equivalent at a MARR of 10%. 3. A machine costs \$80,000 installed and \$6000 per year to operate. At the end of its 8 year life it has a \$15,000 salvage value. In year 5 a major overhaul is required at a cost of \$30,000. Find the EAC at an interest rate of 12%. Textbook Problems 5-11, 5-33, 5-41, 5-45, 6-9, 6-13, 6-17, 6-25...
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